| Mr. R.A. Short | |
| General Director/Legislation | |
| Tax Policy and Legislation Branch | |
| Department of Finance | |
| 16th floor, East Tower | File No. 7-3511 |
| L'Esplanade Laurier | J. Shaw |
| 140 O'Connor St. | (613) 957-8968 |
| K1A 0G5 |
June 11, 1990
Dear Al:
Re: Paragraph 88(1)(d) of the Income Tax Act
We are writing to obtain your views as to whether a paragraph 88(1)(d) "bump" ought to be available in a particular fact situation, which is as follows:
1. A non-resident corporation held, through its Canadian subsidiary, shares of a third company, which shares yet another company wished to purchase, but for its own shares, rather than the cash sought by the non-resident.
2. A fifth corporation was prepared to act as an intermediary, paying the non-resident the cash it sought for the target shares and exchanging the target shares for shares of the prospective purchaser.
3. The transactions were carried out by the intermediary corporation, itself a Canadian corporation, buying for cash from the non-resident all of the shares of its Canadian subsidiary. The Canadian subsidiary was immediately wound up into its new parent, the intermediary, and an 88(1)(d) "bump" in cost base of the target shares was considered applicable. The intermediary exchanged the target shares for shares of the purchaser corporation.
21(1)(b)
R.J.L. ReadActing Assistant Deputy MinisterLegislative and IntergovernmentalAffairs Branch
c.c. B.J. Bryson A/Director Current Amendmentsand Regulations Division